Non-Disclosure Agreement Law in the United States

Federal law requires two specific clauses in certain NDAs: a whistleblower immunity notice for trade secrets, and a mandatory protection statement for federal employment. It also prohibits NDAs that impede government reporting, restrict labor rights, or silence sexual misconduct claims before disputes arise.

What should be in a standard NDA?

No federal law lists required NDA terms, but most NDAs cover four core elements. These provisions are shaped by state contract law and federal trade secret standards.

Definition of protected information. NDAs usually define "confidential information" as non-public business, technical, or proprietary data, with standard exceptions for publicly available information, pre-existing knowledge, and independently developed materials. Under the Defend Trade Secrets Act, information qualifies for federal protection only if "the owner has taken reasonable measures to keep such information secret" and "the information derives independent economic value, actual or potential, from not being generally known" (18 U.S.C. § 1839(3)).

Receiving party obligations. The recipient typically must keep information strictly confidential, limit disclosure to authorized personnel, use it only for specified purposes, and return or destroy materials upon request. Federal courts treat NDAs as "an important factor" in determining whether reasonable secrecy measures exist, though not dispositive standing alone (Trade Secret Case Management Judicial Guide 2023).

Duration and scope. Most NDAs specify a confidentiality period, with duration typically governed by state law reasonableness standards rather than federal rules.

Remedies for breach. Liquidated damages clauses, injunctive relief provisions, and attorney's fee shifting are common. However, liquidated damages must represent a reasonable estimate of anticipated loss rather than a penalty to be enforceable (Slyce Coal Fired Pizza Co. v. Metropolitan Square Plaza, LLC, 2025 IL App (1st) 221279 (Ill. App. Ct. Mar. 31, 2025)).

What clauses are legally required in an NDA?

Two federal statutes impose mandatory language requirements.

DTSA Whistleblower Immunity Notice

Employers must provide notice of immunity in any contract or agreement with an employee that governs trade secrets or confidential information. The notice must cover the immunity in 18 U.S.C. § 1833(b): individuals cannot be held criminally or civilly liable for disclosing a trade secret (A) in confidence to a government official or attorney solely to report a suspected violation of law, or (B) in a sealed court filing (18 U.S.C. § 1833(b)(3)(A)).

Employers can comply by referencing a policy document instead of including the full notice text (18 U.S.C. § 1833(b)(3)(B)). This applies to contracts "entered into or updated after May 11, 2016," and "employee" expressly includes contractors and consultants (18 U.S.C. § 1833(b)(3)(D), (b)(4)).

Penalty for omission: The employer may not recover exemplary damages or attorney's fees under 18 U.S.C. § 1836(b)(3)(C) or (D) against an employee who did not receive notice (18 U.S.C. § 1833(b)(3)(C)).

Federal Employee Mandatory Statement

Federal agencies must include a specific, verbatim statement in any nondisclosure policy, form, or agreement with employees or applicants (5 U.S.C. § 2302(b)(13)(A)):

"These provisions are consistent with and do not supersede, conflict with, or otherwise alter the employee obligations, rights, or liabilities created by existing statute or Executive order relating to (1) classified information, (2) communications to Congress, (3) the reporting to an Inspector General or the Office of Special Counsel of a violation of any law, rule, or regulation, or mismanagement, a gross waste of funds, an abuse of authority, or a substantial and specific danger to public health or safety, or (4) any other whistleblower protection. The definitions, requirements, obligations, rights, sanctions, and liabilities created by controlling Executive orders and statutory provisions are incorporated into this agreement and are controlling."

Federal agencies cannot use NDAs without this statement. They also cannot restrict employees from reporting to Congress, the Special Counsel, Inspectors General, or internal investigators (5 U.S.C. § 2302(b)(13)(B)).

Do NDA rules apply to independent contractors?

Yes, for the DTSA whistleblower notice. The DTSA defines "employee" for the notice requirement to include "any individual performing work as a contractor or consultant for an employer" (18 U.S.C. § 1833(b)(4)).

What makes an NDA unenforceable?

Federal law voids several categories of NDA provisions regardless of state contract rules.

Sexual misconduct NDAs. The Speak Out Act renders pre-dispute nondisclosure and nondisparagement clauses judicially unenforceable in sexual assault and harassment disputes (42 U.S.C. § 19403(a)). Post-dispute settlement agreements remain valid, and trade secret protection is preserved (42 U.S.C. § 19403(d)).

SEC whistleblower protection. Rule 21F-17(a) prohibits any action to impede communication with SEC staff about possible securities violations, including enforcing confidentiality agreements. The SEC has assessed penalties ranging from $375,000 to $10 million for violations (In the Matter of CBRE, Inc.; In the Matter of D. E. Shaw & Co, L.P., Admin. Proc. File No. 3-21775 (Sept. 29, 2023)).

NLRA Section 7 rights. Confidentiality and non-disparagement provisions in severance agreements violate the National Labor Relations Act when they would reasonably tend to interfere with employees' right to engage in concerted activities for mutual aid or protection (National Labor Relations Board v. McLaren Macomb, Nos. 23-1335/1403 (6th Cir. Sept. 19, 2024)). Supervisors are excluded from NLRA coverage under 29 U.S.C. § 152(11) and may be subject to broader terms.

EEOC participation rights. No waiver may interfere with the right to file a charge or participate in an EEOC investigation (29 U.S.C. § 626(f)(4)). The EEOC will not enter settlements containing confidentiality provisions that chill these protected rights, including requirements to refrain from filing future charges or participating in investigations (EEOC Standards for Settlement of EEOC Litigation, May 21, 2024).

What are the penalties for breaking an NDA?

For trade secret misappropriation under the DTSA, available remedies include damages for actual loss, unjust enrichment, or a reasonable royalty (18 U.S.C. § 1836(b)(3)(B)). Courts may award exemplary damages up to double the damages award for willful and malicious misappropriation (18 U.S.C. § 1836(b)(3)(C)) and attorney's fees in certain circumstances (18 U.S.C. § 1836(b)(3)(D)). The statute of limitations runs from "the date on which the misappropriation is discovered or, by the exercise of reasonable diligence, should have been discovered" (18 U.S.C. § 1836(d)).

When will a court enforce an NDA?

Federal law establishes several constraints on enforcement, particularly for trade secrets.

Injunctive relief limitations. Courts may not issue injunctions that prevent a person from entering an employment relationship based merely on information they know; conditions must be based on "evidence of threatened misappropriation" (18 U.S.C. § 1836(b)(3)(A)(i)(I)). Injunctions also cannot conflict with state law prohibiting restraints on lawful professions (18 U.S.C. § 1836(b)(3)(A)(i)(II)).

Reasonable measures requirement. Trade secret protection requires that owners take "reasonable measures" to maintain secrecy. Courts evaluate factors including access limitations, confidentiality training, marking protocols, and departing employee procedures—NDAs alone may be insufficient (Trade Secret Case Management Judicial Guide 2023).

Functional noncompete analysis. Overbroad NDAs that effectively prevent employees from working in their field may be unenforceable as de facto noncompetes. Courts examine whether provisions cover public information, general knowledge, or third-party data (TLS Mgmt. & Mktg. Servs., LLC v. Rodriguez-Toledo, 966 F.3d 46 (1st Cir. 2020); Brown v. TGS Management Co., LLC, 57 Cal. App. 5th 303 (Cal. Ct. App. 2020)).

Whether a specific NDA provision crosses into unlawful restraint depends on the industry, the employee's role, and how the information is actually used. Because these rules depend on your specific job duties, Ask Sawyer researches federal and state law to answer questions about your facts.

What mistakes make an NDA invalid?

Missing whistleblower immunity notice. The most frequent federal compliance failure is omitting the DTSA notice. Any "update" to a contract after May 11, 2016 may trigger the notice requirement—though whether routine amendments qualify remains unresolved.

Overbroad confidentiality definitions. NDAs that sweep in "any information relating to the company's business" without limitation risk judicial narrowing or invalidation. Federal courts have rejected provisions extending to public information or general industry knowledge.

Conflicting SEC carveouts. Generic confidentiality language that requires prior employer consent for regulatory contact, or that creates ambiguity about SEC reporting rights, violates Rule 21F-17(a) even if a separate whistleblower provision exists elsewhere in the agreement.

Predispute sexual misconduct clauses. Standard employment agreement templates often include confidentiality provisions that become unenforceable under the Speak Out Act when sexual harassment or assault claims arise.

Supervisor misclassification. Treating employees as supervisors for NLRA purposes to impose broader confidentiality restrictions requires careful application of the 29 U.S.C. § 152(11) test—authority must involve independent judgment, not merely routine or clerical direction (NLRB v. Kentucky River Community Care, Inc., 532 U.S. 706 (2001)).

How do state NDA laws differ from federal rules?

Federal law establishes minimum standards but does not preempt more protective state rules. States commonly impose additional requirements in areas where federal law is silent:

What law governs my NDA?

Usually the state specified in your contract, or where you work if none specified. Federal courts apply state choice-of-law rules in diversity cases (Klaxon Co. v. Stentor Electric Manufacturing Co., Inc., 313 U.S. 487 (1941)). Forum-selection clauses are "prima facie valid" under federal precedent unless enforcement would be unreasonable—such as when procured by fraud, the chosen forum is gravely inconvenient, or enforcement would violate strong public policy (M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972); Atlantic Marine Construction Co. v. U.S. District Court for the Western District of Texas, 571 U.S. 49 (2013)).

Because enforceability depends on which state's law governs and how courts there treat specific provisions, Ask Sawyer analyzes both federal baseline rules and applicable state overrides for your particular agreement.